All Forum Posts by: Victor Menasce

rentometer.com can provide you with some comparable rentals in your area. Just note that crossing major boundaries like i-10 can change the market characteristics dramatically. 

Are you local to Mesa? Do you have a property manager? If not, I can recommend one I've been using for a couple of years with good results. 

RentManager and Yardi.

We like RentManager and use it in our Arizona operations. Yardi is used by our accountant in Chicago and it works well. Yardi is generally more capable. The only downside to Yardi is that there are only two levels of user (restricted and super-user). In the case of our accountant, we can't be super-user or we'll see all his other client's files. So we are somewhat restricted in what we can do. 

Pretty straight-forward. Your goal isn't to be accurate in your construction estimate. Your goal is to be safe. 

I've purchased properties that have been boarded up that had tons of violations and I could not even get inside the see how bad they were. So I assumed they needed to be demolished and rebuilt. If the reality was better than my assumption, then I got a bonus. If the deal still made sense with the conservative assumption, then I'm in good shape. 

If you can't do a deal that's safe, then don't do it.

Example: The property below in Philadelphia was purchased without inspection for $40,000. These are before and after pictures. We put $120,000 in reconstruction. The finished product appraised at $235,000 and is leased at $2,000 per month. We refinanced it at 70% loan to value. Strong project that generates good cash-flows.

I would ask the HOA for a copy of the bylaws and constitution. That way you know exactly what is allowed. I often find that people provide information that is partly correct (actually incorrect). If you can't find that restriction, then go back to the HOA and ask them to show you where it is written that is legally binding preventing a company from taking possession of the property.

In my experience, assigning contracts and staking an assignment fee is a valid way to do some deals. This is only one tool to have in your toolbox. As an investor, I probably do 3-4 such deals per year. Not many, but sometimes it's the right tool for the project. 

When working with your attorney, ask him/her to come up with a simple contract assignment. That is the agreement needed to assign the contract to the new buyer. Note however, that if the new buyer fails to close, the liability may be yours. So you should supplement the assignment with another agreement that governs the terms of the assignment. It should cover what happens if the new Buyer discovers a problem in due diligence. It also should make sure that you get paid, and ensure the title company does not close the transaction without sending you the assignment fee. This is typically done with an irrevocable letter of direction from the new Buyer to the Buyer's attorney or Escrow agent.

This is all 100% legal, unless there is a provision in the agreement of purchase and sale that prohibits assignment. 

Hope that helps.

Victor Menasce

President of the Ottawa Real Estate Investors Organization

Managing Partner of US Real Estate Partners.

I'm continually amazed at the number of investors buying commercial properties at market rates. In that case, making money is based on elements outside your control (interest rates, market appreciation). You should never rely on those elements. When the next down cycle hits, you'll get wiped out just like so many did in 2008. If you buy a property at a discount to the market and then raise it's value to highest and best, with a healthy 25-30% margin, you make money. You can then refinance at 70-75% loan to value and pull some equity out to recover cash. But you still have a conservative debt to equity ratio. At that point, you no longer care what the market is doing. You're holding a cash flowing asset with good debt coverage and little to no cash tied up. Who cares about cap rate compression? It's irrelevant. You can employ this approach in any market condition. Can't find those deals? Ok. Then create them. It's not that hard.

There are lots of online tools in the US to get sold comps. The transactions are a matter of public record and are usually published online in most counties. Things aren't nearly as open here. In Canada, the sales are also available from the land registry, but are not published online. You can physically go to the land registry office and request the info. There are two online methods to access the data. If the sale was done by a realtor, it will be on the MLS and any realtor can pull the comps from the MLS. All real estate lawyers in English Canada subscribe to a service that enables them to search title. You may be able to get your lawyer's clerk to perform searches for you at a modest cost. Hope that helps. Victor Menasce President of Ottawa Real Estate Investors Organization.

Why is it important that the property be in the NYC area? If the numbers don't work, they don't work. The reality will probably be worse. I reserve an additional 8%~15% for maintenance depending on the property. When you take that into account, you're definitely in the red. By contrast, I invest in projects in Philadelphia that are close to the universities. I am building new construction. All-in my costs are about $102,000 per door. Rents are $1,250 per month. With a 10 year tax abatement, my cash flows are about $1200 per month for a 4 unit building. I'm able to refinance the project within a year at 70% loan to value and recover 100% of my invested cash. Would I stop doing these projects and buy your NY property? No. Focus on creating the right team in the right location where you can create a stream of investment. Deals can be easily created from there. I'm not preaching, just sharing what I do. Hope that helps. V.

The access to some capital is nice. But real estate is a game of big numbers. Everyone eventually runs out of cash. The key to scale your business is to learn how to raise capital. But before you consider any investment, determine what your goals are. I invest every day, full-time in multiple markets. I rarely put my own cash unless the deal is exceptional. Most other deals that generate 25%-30% returns are strong enough to proceed with other peoples money. Finally, get educated on how to make money. I really want to emphasize this point. You'll get lots if people recommending deals. They'll want you to co-invest with them. Get educated first.

Apart from the stale article, it's a good question. In my view, real estate is an intensely local business. The best place to buy is where there is huge demand and short supply. Next to a university, a hospital, a new headquarters, a new oil industry expansion.... You get the idea. Make sure you're next to high value property. So when you develop your property, you can borrow some high value from your neighbors.